Bruce P. Corrie, PhD, Chai.News
Dr. Samuel Myers, Jr., at the Humphrey School has done some ground breaking research examining lending patterns among the largest banks serving the Twin Cities. He is a seasoned and well respected econometrician and did some heavy duty number crunching using two credible data sets – the Home Mortgage Disclosure Act data and the Community Reinvestment Act data for the period 2008-13. Then he used multiple quantitative techniques and also added a survey sent to banks in the area. He used multiple techniques to analyze the problem and interestingly all of these techniques came to a similar conclusion.
Then like a good professor he graded the banks based on how well they performed in providing loans to the ALANA (African Latino Asian and Native American) communities.
His conclusion was that a large part of the disparity in lending to ALANA individuals could not be explained by the wide range of variables considered that included factors such as credit risk, income, unemployment rate and other factors. He attributed this unexplained component as evidence of discrimination in lending in the metro area by financial institutions.
He even used some simpler analysis looking at loan denial rates by institution and found quite large disparities in lending to ALANA individuals (See page 55 in the report). The report has data broken down for each of the ALANA communities. Black and American Indian communities fare the worst. He also drilled down to smaller areas such as Saint Paul Ward. He made a similar presentation in Minneapolis recently.
The bank that has my deposits for a long time received a grade of D.
So when I call my bank I am going to send them the Myers credit study and have them look up their grade and data and explain to me as a long-time customer – is this study accurate? If so, let’s begin a conversation how we can change this scenario. It I do not get a satisfactory answer I am going to move my account to one of the banks that has a higher grade in the study.
You can do the same and help transform the metro market.
In a presentation to the Saint Paul City Council, on January 27th, 2016 Dr. Myers and Vic Rosenthal of Jewish Community Action (co-sponsor of the study together with the Minneapolis Foundation), suggested that the city use this analysis to evaluate how well the financial institutions are serving the tax payers and residents of Saint Paul.
The City of Saint Paul has a precedent in engaging financial institutions to better serve residents especially in low income areas. This study now adds a strong rationale for a new city ordinance (as suggested by Councilmember Jane Prince) requiring social responsible and engaged lending in the city, by banks doing business with the city, and especially in low income areas starved for capital.
As a taxpayer in the city of Saint Paul, I agree.